Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Net Accounts Receivable: Allowance for Doubtful Accounts

Financial Accounting

7. Receivables and Investments

Net Accounts Receivable: Allowance for Doubtful Accounts

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Multiple Choice

The book value of a plant asset is:

The asset's fair market value at the balance sheet date

The asset's original cost minus accumulated depreciation

The asset's original cost plus accumulated depreciation

The amount received from selling the asset

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Verified step by step guidance

Understand the concept of 'book value': The book value of a plant asset refers to the value at which the asset is recorded on the company's balance sheet. It is not the fair market value or the selling price but is derived from the asset's original cost and accumulated depreciation.

Recall the formula for book value: The book value of a plant asset is calculated as the original cost of the asset minus the accumulated depreciation. This reflects the net value of the asset after accounting for wear and tear or usage over time.

Break down the components: The 'original cost' is the purchase price of the asset, including any costs necessary to bring the asset to its intended use (e.g., shipping, installation). 'Accumulated depreciation' is the total depreciation expense recorded for the asset up to the balance sheet date.

Eliminate incorrect options: The fair market value and the selling price are not used in calculating book value. Additionally, adding accumulated depreciation to the original cost would not make sense, as depreciation reduces the asset's value over time.

Conclude with the correct answer: The book value of a plant asset is the asset's original cost minus accumulated depreciation. This aligns with the accounting principle of matching expenses with revenues over the asset's useful life.